Part 3: Costs

Inquiry into events surrounding the chartering of aircraft by the Department of Work and Income.

Cost of the Course

The costs of the Wairakei Course were:

GST-inclusive $
Air travel 168,429.91
Accommodation 11,030.71
Food and beverages 21,494.07
Conference room hire 2,949.99
Leadership development activities 27,013.50
Miscellaneous expenses 4,288.65
Total Expenditure $235,206.83

The goods and services were either purchased specifically for the course or supplied from stocks held by the Department.

We have detailed below the source of the supply of the goods and services.

Supplier Service Provided Amount (GST-incl.) $
a DestinatioNZ Limited Air fares 165,055.91
b Scheduled Airlines (booked through internal systems) Air fares 3,374.00
c Wairakei Resort
d Footprint Expeditions Leadership Development Activities 27,013.50
e Pronto Group Limited Printing 1,926.05
f Internally Sourced Items Office supplies, gift packs for staff 1,862.99


We consider that the cost of $235,207 (GST-inclusive) for the Wairakei course was excessive and did not represent value for money. However, we are satisfied that the costs we have identified are materially complete.

We have reviewed all other training courses and conferences organised by the Department since it began on 1 October 1998. We found no other examples of excessive spending on training.

Cost of Air Fares

The cost of transporting the course attendees to the course seems very high when compared to the cost of scheduled flights to Taupo. However, for reasons discussed below, we have concluded that such a comparison is not valid.

As previously stated, transport for the course attendees was arranged by DestinatioNZ, a company that specialises in organising travel for large groups.

Air New Zealand advised us that the cost of typical schedule airfares to Taupo were as follows:

Whangarei-Taupo (Return) — $600 (GST-inclusive)

Auckland-Taupo (Return) — $428 (GST-inclusive).

Wellington-Taupo (Return) — $482 (GST-inclusive)

Invercargill-Taupo (Return) — $974 (GST-inclusive).

The total number of staff travelling by air to the course (including both attendees and course “crew”) was 107. The total cost of air travel was $150,147 (GST-exclusive). The average actual cost of air travel for the course attendees was therefore $1,403 (GST-exclusive).

The higher average cost of air travel resulted from the decision to use a mixture of scheduled and chartered flights to transport the course attendees from their home airports to Taupo and to return them home at the end of the course.

We questioned the Course Organiser as to her reasons for using chartered aircraft. She stated in evidence that there was no alternative, since there were insufficient flights available to transport all the course attendees to the course within the timeframe required. Travel arrangements had to be made very quickly because of the short time between the decision to hold the course (on or around 11 May 1999) and the dates on which it was to be held (3 and 4 June 1999).

Her evidence was supported by Daryl James of DestinatioNZ. Mr James stated in evidence that the possibility of using road transport was considered at their first meeting. However, it was discounted because of the early starting time that this would entail for many attendees and because, given the time of year, it was possible that the Desert Road would be closed.

Under normal circumstances, the Department requires that course attendees arrive on the morning of a course and return home on the afternoon the course finishes. We believe that, in general, this is a sound policy, since it helps to minimise accommodation costs and time spent away from work.

The Course Organiser stated in evidence that she believed that, even under normal circumstances, it would be difficult to transport the course attendees into and out of Taupo in line with the Department’s policy. The problem was exacerbated by the timing of the course – on the Thursday and Friday before Queen’s Birthday weekend. The Course Organiser’s evidence was supported by evidence given by Daryl James.

To establish that their conclusion was correct, we re-performed the exercise by asking a travel agent to arrange flights for 110 people to Taupo in circumstances that complied with the Department’s general requirements. The agent reported that it was not possible to organise the transport of that number of people to Taupo under those requirements.

In a written communication, the Department told us of an unwritten “normal practice” concerning travel to and from course and conference venues. We were told that, when travelling to a central North Island venue, staff from Auckland and Wellington travel by road. Staff from the South Island are flown to Wellington and are then transported by bus.

We were told that application of the practice in this case would have meant that all but 44 service centre managers could have driven to Wairakei. In addition, we were told that the start and finish times of the Wairakei course (11.00am on 3 June and 2.30pm on 4 June) were consistent with this practice.

We confirmed that there had been a number of occasions when staff had travelled to courses and conferences at central North Island venues by road. These occasions included the “boot camps” held at Okataina Lodge that had been organised by the Course Organiser.

Through her solicitor, the Course Organiser disputed that there was any such “normal practice” – or, alternatively, stated that if there was indeed such a practice, it had never been communicated to her.

As indicated in paragraph 3.012, the possibility of using road travel was considered at the initial meeting between the Course Organiser and Daryl James and was rejected. We observe that, of the 12 people interviewed in detail, nobody mentioned that travel by road wherever possible was the “normal practice”.

The Department’s position about the “normal practice” of driving to courses wherever possible provides a contextual background against which other actions of senior managers should be viewed. For example, notwithstanding the “normal practice”, the Chief Executive and General Manager, Human Resources approved payments that enabled a large number of course attendees to travel by air.

We have concluded that, if the Department had not arranged chartered flights to transport its staff to Wairakei Resort for the course, its only realistic alternative would have been to commit large numbers of staff to beginning a road journey at a very early hour and driving long distances in potentially inclement weather.

We note that the Department has disputed this conclusion.

We regard both alternatives as being far from ideal. For this reason, we concluded that Wairakei Resort – for that number of staff and in those particular circumstances – was not a good choice as a venue.

We found no compelling reason why the course should have been held at Wairakei Resort. Had the course been held at a more accessible location, the transportation difficulties would have been more manageable.

Speculation about Possible Fraud

Initially, there was some speculation that the dealings between the Course Organiser and DestinatioNZ may have provided scope for fraud.

We found that:

  • Wairakei Resort recommended Daryl James of DestinatioNZ to the Course Organiser at an early stage, when the venue was arranged.
  • Both parties stated that they had not had any prior acquaintance or dealings, and we found no evidence that they had.
  • We have reviewed all the costs and have identified the ultimate recipients of the money paid.

Daryl James stated in evidence that he had advised the Course Organiser that the travel arrangements would be expensive. He had explored the possibility of changing the dates and the venue. He had proceeded only after being told that the venue and date were fixed, and after the Department had indicated its acceptance of a detailed written quotation.

His evidence on these matters was supported by other evidence. We reviewed the relevant financial records of DestinatioNZ. The company appears to have discharged a difficult brief in a professional manner, and we are satisfied that its charges for the services provided were reasonable.

Given these findings, we believe that there is no evidence whatever of fraud.

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